Firing the right bullets: Exploring the effectiveness of the hired-gun mechanism in the provision of public goods

LIU, Jia, RIYANTO, Yohanes E. and ZHANG, Ruike
(2019).
Firing the right bullets: Exploring the effectiveness of the hired-gun mechanism in the provision of public goods.
Journal of Economic Behavior & Organization, 170, 222-243.

Abstract

We explore the robustness of the “hired-gun” mechanism proposed by Andreoni and Gee (2012)—a centralized punishment mechanism to promote the collective provision of public goods. In order to avoid the race to the bottom, the hired-gun mechanism relies on the use of the unilateral and tie punishment imposed on the lowest contributor(s). We examine the effectiveness of the hired-gun mechanism under varying sizes of the unilateral and tie punishment by theoretically deriving and experimentally testing a range of punishment parameters that would lead to full contribution. We show that, to some extent, the effectiveness of the mechanism depends on the size of both types of punishments. In particular, the lack of unilateral punishment renders the mechanism less effective.